Robb Corporation Uses the Allowance Method of Accounting for Uncollectible

question 46

Multiple Choice

Robb Corporation uses the allowance method of accounting for uncollectible accounts. During 2011, Robb had charged $80,000 to Bad Debt Expense, and wrote off accounts receivable of $90,000 as uncollectible. What was the amount of the decrease in working capital as a result of these entries?

• A) $0
• B) $90,000
• C) $80,000
• D) $10,000

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Definitions:

Net Book Value

The value of an asset as recorded on the balance sheet, calculated as the original cost minus accumulated depreciation and impairments.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in an equal annual amount.

Depreciable Cost

The cost of a fixed asset minus its salvage value, which is the total amount that can be depreciated over its useful life.

Initial Cost

The amount of money spent to acquire or start up an asset or investment, excluding any subsequent costs for maintenance or operation.